this is today's "worldwide exchange." i'm ross westgate. european stocks plunge as the prospects of political gridlock in italy sends jitters through the market. italian banking stocks leading the way lower. the center left coalition win tess lower house, but no one has secured an obvious majority in the senate. sylvia berlusconi has hinted he could be open to an alliance. japan's big exporters like sony and rico take it on the chin. and ben bernanke heads to capitol hill today to try to provide some soothing words about fed policy and calm investors' fears about weak global growth. >> you're watching "worldwide exchange," bringing you business news from around the globe.

>> welcome to today's program. we're over an hour of trade in europe. the voft majority of the dow jones 600 is down. so we're weighted heavily to the downside. stoxx 600 in europe down about 1% at the moment. translate that into individual indices. the ftse 100 down 1.4%. the xetra dax nearly 2%. the ibex is down nearly 3% and the ftse mib down nearly 24.25%. the banco bmx down 7.3%, bankintender down 5.73%. we've seen spikes rise higher in italian bond yields. up 2.6 of%. the italian ten-year, 4.73%. we have had a 4.8% yield print on that, as well. and we'll keep our eyes ahead, of course, tomorrow. we've got a fresh ten-year auction coming up.

going to be a key test with this political gridlock. i'll show you the rest of the bond markets, as well. this is where we stand in the u.s. spanish yields higher, 5.31%. interestingly enough, we look ahead to mr. person unanimousky to give treasuries. gilt yield 2.018% is where we stand at the moment. giving support because of the risk off caused by those italian elections. euro/dollar, that's been down to 1.3039. that's the seven-week low, january 10th we hit that. dollar/yen, what a wild day yesterday for dollar/yep. we hit a 33-month high for dollar against the yen, 94.77. then we fell down to 90.85 at the moment. 91.94. aussie/dollar still weak. sterling/dollar, we're spinninged in at this low, 1.5166. selling has bounced back as you might expect against the euro. the italian election yesterday

caused gold to spike up to around 1600. just below it at the moment at 1598. brent continues to weaken below 114 and nymex a little weaker at 92.32. that's where we stand in reaction to the after markets here to the italian elections. let's get more reaction on the asian markets with sixuan. >> thank you, ross. asian markets fell sd as the political stalemate in italy was felt here in asia spooked investo investors. the nikkei tumbled 2.25%. exporters with european exposure took a hit from the election dead lock in italy. sony, nikon and all the automakers saw their shares dip, but wall come stock is up 10% after nomura raised its rating. the supplier of digital tablets

to samsung saw recent release of the samsung galaxy 8. banks and brokerages, they turn into negative territory. and the hang seng today lost 1.3% in south korea after the kospi lost 0.5% weighed down by automakers. and australia's asx 200 had a broad sell-off, down by 1%. ingd ya's sensex, an hour before close, currently down 1.2%. back to you. >> sixuan, cash you later. italians this morning heating up to a state of paralysis after no party gained enough.

berlusconi says he gained the lower house while beppe grillo gained 25.54% of the seat. former prime minister sylvia berlusconi dismissed talk of a second poll and suggest he may reflect on an ally yoons with the center left after winning 29.18% of the vote. steve has been in milan. getting reaction to these elections. steve, you expect a lot of people already. is there a single consensus on the way for it in terms of likely outcomes or not? >> no, absolutely nothing. and i don't want to say what i'm about to say lightly. this is one of the biggest messes it could possibly be. we have come up on election reform. nobody how is knows how or when it will take place. bearing in mind, there is

enormous distaste between the allies of berlusconi and the allies of bersani. then you have grillo who had this stunning performance of a party that was formed a couple of years ago. this is probably as big a mess as it could be, as well. some people are saying, yes, it was a stunning victory for their side including berlusconi's party. let's hear what he had to say before we move on. >> translator: this is a very positive result. i would even say extraordinary. everybody spokes to president berlusconi, hit facing spirit and his face and success. >> the newspaper this morning said the miracle was the result. but in terms of you, the

investor, i don't know how you trade this one. it's incredibly confusing given that we don't know the timeline for potential coalitions, for new presidents, for president of the chamberes and if indeed we do get a new election and when and where this will manifest itself. let's get some ideas of trading. how does this turn out compared to what you hoped it would turn out for and given the reaction we're seeing in italian equities and bonds today, it looks like investors are returning to the hills. >> it was in line with our work scenario. and this means that the market reaction is negative. we certificated that fred between btp and up from 280 to 293 yesterday, so in line with average of 2012 on one side and from the other side that equity

risk premium can increase, actually, from the points. >> there's an adage in the markets that you don't buy on the first profit warning. i.e., you wait for more bad news to come through. we've had the same big falls now in italian equities immediately after this election. do you think now is a good opportunity to get into some of these stocks? >> it seems too early. we think that the market slowed down by around 10%. today is just down 4%. about a possible new government. what we suggest is to invest in state stock, if you know what i mean. that means stock with a low coalition to the italian market and possibly low leverage. and the weak selection of the portfolio, we see shares which

are more resilient to this political shutdown. >> you're going to name some of the stocks. if the broader market has another 6% to fall, those stocks are going to fall, as well, aren't they? >> yes. i'm talking about relative -- possibly, yes. >> you wouldn't really buy them, then? >> on this date, i would be quite cautious on intesting in equity markets. >> give us some of the names it's least like or you most prefer. >> in this scenario with this outcome, the most preferred shares, as i say, less exposed to italy, more or less. we are suggest iing salvatora degamo and we are suggesting recordati. all share low exposure to italy and low level of debt. >> you can put your drink on and

camporas you can drink your troubles away. time for a drink, then, ross. back to you. >> thanks for that. plenty more to come from steve and julia from milan. joining us now is annalisa pietta. clearly going into this, investors priced in stability. the question is, where does this leave the ecb's omt backstop, bearing in mind that for it to be enacted you need a government that can deliver reform. >> what we see at the moment is that even with the chance of having a great -- going forward, at least to form a temporary government, probably they will have no numbers to actually implement the reform to activate

the omts. too big political parties, big coalition, they would need to move out the divergence has been their program and they would need to converge in a way to what monti did the last year, which is what the ecb would ask them to do in the event of their credit line and the activation of the omt. so it's a very complicated situation. they will have to step up at some point or realize that along with their ideas and their programs, they would need to stand back. >> and that's the thing about this election, it clearly showed that no one is interested in monti's reforms. he had a very poor showing. the agenda from this election gets no support at all, really,

and large anti-brussels vote, effectively, as well. i mean, this is the electorate saying we're not interested in your reforms, we're not sxwd in your brussels-led austerity. where do you go from there? >> at some point they would need to realize if they want to stay in the eurozone and if they want to maintain the credibility that monti built up last year, after the big clubs of the italian credibility with the late berlusconi government, they will need to find an agreement if they want to save the country. it's not easy because they want need to, as i said, move out their principal, the principal for their program. but if they want to continue to kind of give italy a continuation from what we've seen last year, they will need to find a way out. obviously, italian people voted against the austerity measures as we saw, like, from the

results of the compliancy of grillo at the lower chapter as at the upper house. it's not part of a coalition. if they want to have a government, they would need to find an agreement and it's not possible to have something that goes completely against what has been done in the past. >> how much dodge was first to be done -- and i don't think how long it's going to take, whether we have a revote. how much is going to be done damagewise economically in the short-term with actually no new policies? >> well, we have the scenario where italy is already in recession. with no government, i would say, because even if there is a coalition, there will be a very, like, short-term government. they would need to implement

probably the electoral low and some major reforms. but then it's eventually government that will envery soon for the new election. we see that for the next year, there will be no chances of having any similar for investment. haas holds will be very skeptical on investing their money. let's say the money back from their property -- in the electoral campaign. there is no support for major spending ram. companies resident going to review their capital spending because there is no chance the economy is going to rebound anytime soon. capital flows from abroad will be reduced because they will

have no space in the recovery in the italian economy. so the economic scenario is quite gloomy, i would say. >> right. annalisa, thanks for that, economist at new edge. the euro, meanwhile, something to speak of against the dollar in almost seven weeks because of the strata political gridlock. where does the currency go now? get some excellent analysis on cnbc.com. we also want to know from you, have investors been too complacent in the run up to the italian elections? e-mail us, tweet or direct to me, @rosswestgate. the u.s. is 1re67 in focus, as well. the white house is pressing on republicans to reach a deal before cuts kick in this friday. also, it's still going on in barcelona, the world's top phonemaker has been revealing their latest products at the mobile congress. kelly will join us in a couple

of moments. she's been dialing into a winner. and macy's report what's been ringing through their till today. we'll discuss luxury retail and how cashing in tends to be very much in fashion, at 11:30 cet. plus, all the latest developments in milan, special election coverage with steve and julia. plenty more to come on today's "worldwide exchange."

let's recap where we stand with european stocks post the italian election results. in conclusion, italian election results, the xetra dawn down 1.9%, ibex down 3%, ftse mib down 4.19%. unicredit down 8.45%. eye trillionan yields spark sharply higher. the five-year yielding 3.46%. mrbts plenty more to come in the fallout. meanwhile, the wireless out

ultra high definition service, at the mobile world congress in barcelona. it apparently let's customers transfer images or videos are naptly from their phones to an hdtv. effect, a user can play a game on their mobile and have it broadcast live on their television. kelly has more from barcelona. kelly, would is going to watch it on the tv as i'm broadcasting it. what, do i get any children to sit around it? how does this work? >> well, ross, i guess that's something only you can answer. the technology is one thing. they think there's huge demand basically for this next generation of devices, whether it's television webs whether it's mobile phones. there's been plenty of concern about how much innovation you can squeeze out of this hardware. we mentioned, of course, this ability to wirelessly stream things from a mobile to a

television. nokia is going to let you wirelessly charge your cell phone in your car. it's really blowing my mind here. you know what kind of technology i'm used to. it's a whole new frontier. for what we've included with gaming, this is a company that's making waves with its mobile devices. the company's new ceo has made an effort for sony to catch up in this space and surprisingly, they kind of have, at least on the hardware front. the smartphones and the tablet wes b ross, that they've announced here going down pretty well with consumers the. first i had to kozumi last night, is the company at risk for spreading itself too thin to try and beef up in this area? here is what he had to say. >> i think one of the first thing that i have done when i first became president of sony

corporation last april was to ar particular ewe lay the three businesses that we need to focus on. one is mobile phones, the other being video gaming and services and the third being digital imaging. so concentrating on those images and making sure we're not spreading our resources too thin. >> is this new tablet your samsung killer? >> i think both the smartphone and the experia tablet z are fantastic products that packs into a fantastic form factor all the things that sony is known for. so great audio quality, great picture quality, great form factor, like design and really proud of what the engineers have done with these products. >> what about the integration with ps4? >> one of the things we talked about last week was the fact that there's a lot of game play that happens in conjunction with the interoperability between the

ps 4 and our android based tablets and our smartphones. the consumer is look forward to a great experience into their mobile devices. >> what impact has that had on your company? >> with the dollar exchange rate, the impact has been neutral. sony has a lot of dollar-based costs. so it's pretty much a wash. as the yen weakens versus the euro, that doesn't present an advantage in the long-term. but, for example, in the short-term because the weakness really took place after the important selling season last year, a lot of the business already was done for this fiscal

year so there's really no impact there. of, you know, tain taking advantage of the weaker yen. going forward into the next fiscal year and next holiday season, that's a different story. >> ross, you know me. i loved that point. i thought it was so interesting. we'll wait and see the effects that the holiday season this year has on sony's bottom line given that they'll see more of the impact from the weakening yen. tt yen does resume its downward trend, this is one thing that not only sony, but its japanese rivals will see as a tailwind going forward. >> at least they've been benefiting. a lot shocked today. a bit of a whipsaw session for them yesterday, kelly. they have to learn to live with what the current is, anyway.

i think now when you choose a smartphone, it's about working out, you know, like handbags, right? you have to decide which of the size handbag that you need, right, do you need the big bag, the night bag, is that where we are with smartphones, right? is that where we are? >> not a bad analogy, actually. i've said to executives, show me your smartphone. what device do you have? it's not just one. some of them have two, three, four that they're carrying around on them. they'll have a larger tablet, a mid size tablet, and a smaller smartphone. the message being people are able to tote along several handbags.

>> match your device to your handb handbag. >> or to your pocket. >> exactly. if i'm just wearing a suit with no briefcase, i'll take the one that goes in my pocket. if i've got a brief case, i can take the larger tablet. that's where we're at, isn't it? >> and one final point i'll mention, there now companies which are making little remote control device toes use for your bigger phone. so we have several iterations of products to key off the whatever that main base product is going to be. one thing, not seeing a lot of laptops around here. >> a remote control for my phone. >> why would i want to put an interface screen in? >> there are some saying if you want that interaction for your

main device, you might need a smaller piece. think of it as a blue tooth, something smarter, more portable that you can use to make phone calls. believe me, the new vocabulary coming out is very telling. >>. >> i presume you wear your tablet on your lap and you speak through that. i don't think this stuff is hard. >> you're going to be talking through your car here, by the way. forget all of these devices. it's like you'll be able to talk and pay through everything. >> i already do talk through my car. anyway, kelly, thanks very much. we'll catch you a little bit later. the italian prime minister will meet grillo for post elections comments today at mid day. we'll find out what they come up, if anything. the italian election has produced the worst possible outcome. banks hit hard.

wool speak to our financial strategist right after this.

these are the headlines from around the globe. european stocks plunged after

political gridlock in italy. italian banking stocks leading the way lower. this after the central left coalition win tess lower house, but no one secure an obvious majority in the senate. there's no immunity from the fall out in asia. japan's big exporters take it on the chin partially on fears of the financial crisis in europe. and mr. bernanke is heading to capitol hill today to try and provide soothing words about fed policy and calm investor concerns about weak global growth. >> sylvia burl scone me has been calling on italy aels political party to make sacrifices for the sake of their own country. the former prime minister says he will reflect on a possible

alliance with the center left, but will not do any deals with mario monti. for his part, mr. monti is going to be 3450eg9 with mr. grilliot and the economics minister today for consultations mid day in italy. and joining us from milan, steve sedgwick and julia chatterly, as well. good to see you both. i want to ask you this. do you think mario monti regrets the run and by doing this, how much support does the liberal economic reforms have? >> i think he regrets running for a multitude of reasons. he basically said he wasn't going to run and he did run. the campaign was pretty awful. i suspect he probably should have walked away back to

academia or back to brussels. >> we talked about this, as well. i think he did what he thought was best for the country. he thought stepping away would leave them in a situation where -- >> and by the power thing, as well, you don't think he bought the headlines that a lot of us thought was a possible scenario, that he could have been the kingmaker for better sanny in the event of him being decisive in that upper house. >> that about power or is that about being essential to the reform process continuing? we know who has an influence on the further left party. >> and a second point was equally valid, wasn't it? does he split the votes for the center and the center left and the anti-berlusconi voters by standing in this election and that chase for the majority seats in the senate. >> obviously, yes, but look at grillo. you're talking about someone who got 10% versus 25%.

i think the far more left is beppe grillo. >> and let's put this into context for ow viewers. you have two chambers which have actual power. it's very rare in western democracies to have a senate, an upper house equally as powerful as the lower house. bersani has the majority in the lower house but nobody has the majority in the upper house. that could mean anything. >> and what you're hearing from berlusconi is he'll consider something with the upper left. obviously we have to address this idea of changing the reform. how on earth are we going to pull some kind of coalition from this even in the interim to get it to the next election? >> you've made the point about beppe grillo.

how does he work with these people now when he's previously said he won't and his bedrock of support relied on the fact that he said he won't work with these people? >> he's obviously ruled himself out of any coalition. but he did kind of suggest that if there were policies that the next government were going to be looking at implementing, if he supported them, then he would support. i think this is going to be interesting. we assume he's not going to be in a coalition, but going forward, if there are policies perhaps an actual reform, perhaps suggesting conflicts of interest, he might support that. and i don't think we can underestimate where perhaps berlusconi doesn't want to go back to the polls. >> let's confirm, you haven't got any plans for the rest of the year, have you? because there is a distinct possibility you could be here in

may, june -- >> spring suits me. >> i can't think you how much cases she brought with her. i'll leave that to you, ross. >> the good thing is, if you need to get some outfits, you're in the right lace. >> i've not had time. >> it's a bit pricey for me. >> how long will it take if we call another election, how long would that take? >> this is the point, ross. that could take absolutely months. there is no -- basically what happens now is the president is supposed to get bersani together and say can you form a government? if he can't, we could be back with another election at any time. what's the point of doing that if you haven't gotten the electoral support in the meantime? >> absolutely. we could find ourselves back in this position if they don't do that. and it took 24 days back in 2008 for berlusconi to win a

government despite that he won the land slide. >> so back to your previous point, i think you're going to have some time. so you're already. >> yeah. >> okay. we'll catch you later. >> plenty of shopping opportunities. >> stay steve with you, by the way, if you could. >> i got called on "squawk box" a swedish hitch hiker in front of mila inspect. that's not fair. i look more like a norwegian hitch hiker. got a few issues, sweden. >> you have another job. right. more to come from the duo in milan. european stocks have had hit hard this morning. the xetra dax down 1.89%. ftse 100 down 1.25%. cac 40 down 2% and the ibex down 276%. ten-year spanish yields have hit 5.5%. just off of that at the moment, italian ten years, 4.79%.

italian -- ten-year gilt, the yield is still falling, 2.01% is where we stand at the moment. we have been up to 2.2 in the last week. so who cares about downgrades? currency markets, currently at 1.3086 of. sterling/dollar, 1.5166. just off low of 1.5173 we hit yesterday. joining us with his thoughts is simon moore, financial sector strategist at olive tree financial group. as you might expect, higher yields in spain and italy.

why do you not think we priced in more? >> well, we can see a little bit of reaction in the futures. which is so far this morning the a more to the positive side. that's because basically we haven't seen draghi use the weapons that he said he was going to use in july. back then, there was a genuine feeling that the ur roadway was good to fall apart and draghi said through his words, he would do whatever it takes. and that showed people that it was possible the euro could stay together. what the italian election has done is remind us, actually, that the euro could still fall apart. but i think the bet will be here. draghi hasn't spent the money that he said -- >> to spend the money, he needs

a government in play delivering the -- you don't want omt without doing nothing, do you? >> not in the moment you don't. >> it requires bundes style improvement. the question is, can we form a government in italy that would be able to enact the omt. >> i think the general view is if the powers that be in the center of europe committed to europe italy isn't only the problem this year.

and the peripheral property is being asked, do you wish to balance your budget in the medium term like germany? the answer to that was always initially going to be no. and the idea is we buy time, buy time, buy time so we can rework the politics, have another election, try and muddle through much the same way as they did in the much easier times when the irish, for example, rejected the euro in the referendum. the reaction is negative, but people will say all the ammunition -- >> what is the risk that at some point the populist view rather than the brussels elite actually -- maybe someone takes notice or maybe what the electric tore y'allat wants is maybe what we should deliver rather than the brussels elite,

as you call it. >> well, if you believe in democracy, then that should be the outcome. the question for markets, though, is not will that eventually happen because i think most people suggest yes, it will. what i'm suggesting to you is we still have another several months to go in which the elite have a chance to spend money, kick the can down the road. >> the bundes bank will vote for necessary reforms. is that what -- >> and someone will launch a complaint in the german constitutional court who will hear that in 2014. >> stick around. more to come from you in a few moments.

meanwhile, no surprise that exporters are in the firing line. fushiko has the story for us from tokyo. >> hi, ross. the renewed fears about the european debt crisis were the biggest news here in japan today, as well. the yen regained its status due to decisive elections in italy gaining strength and trading mostly in the 91 level to the dollar. the nikkei 225 dropped 2.3% from the sharp rise in yuan. exporter shares were especially damaged as they took the brunt of the sell-off. carmakers such as honda dropped 3% and toyota down 1.7%. electronics maker shares sony and rico both almost lost 4%. however, many analysts think that the yen's falling trend remains unchanged and it will soon remain unchanged again.

investors see the likely appointment to pursuing the policy in the future. investors looked ahead and bought real estate shares in hopes to affect inflation from deflation into the domestic economy. back to you, ross. >> thank you so much for that. the french finance minister says he hopes italy's bersani can form a government. it is not a wide but a risk for the eurozone and the finance minister says monti reforms were necessary, but italy and europe must deal with softer growth. meanwhile, sigh loan rusty is expected to hit port headland tomorrow. russky could strengthen to a

category four storm by then. the port, which handles a fifth of the world's iron ore has started evacuations. major australian miners have closed local separations as a precaution. australia's second biggest airlines says an intense price war is hurting its bottom line. virgin air's profits fell. the ceo blamed aggressive price competition for missing analyst forecasts, but says the carrier is still on track to lift its underlying profit this year. >> what we have seen over the last six months is the highest amount of capacity flooding the domestic market since 2004. and, obviously, while the competitor keeps adding capacity, then, obviously, pricing will take a hit. >> virgin australian shares rise 5% on the back of those earnings, well understanding the broader equity market. india will borrow $2.8 billion this year for its railway system

and add five new kilometers of new railway lines. fares will not raise. instead, a fuel charge was added on freight, 2 million pounds of frayed travel by rail in india every day. and banks may soon be able to tap china's lucrative domestic fund market. a dow jones store says china's regulator will be bringing out new rails next month to chinese based fund products. standard chattered and uob have priced in to do so. no foreign lenders have qualified in the past since standards were set extremely high. and a reminder of what's on the agenda tomorrow, it's government day in hong kong. and set out measures to tackle the wealth gap. the territory's fourth quarter gdp will be released and we've got key earnings out of hong kong which include ia insurance,

and retailer spree. we've got january sales figures out of japan at 1250 cet. still to come on the show, after moody's recent credit rating downgrades, how can britain get back to work? we'll have a view when we come back.

moody's cited lack of growth as the main factor in stripping its aaa rating and growth was very much on the agenda at the launch of the uk's biggest trade promotion since 1951. >> the international business festival in 2014 will be a key part of the government's drive to promote growth and hit its target of doubling exports by 2020. >> fast growing countries like in asia, we need to be more and more engaged with them. we need to attract more and more investment from them. >> after the age of austerity, the uk needs an age of enterprise. >> i think you'll see things

picking up in 2013. the things will become clears as the eurozone stabilizes. as long as business focuses on the opportunities in the world, which are very, very large, you know, the global economy is going to grow between 3% and 4% over the next couple of years. there's plenty of growth out there. we have to go out and find it. >> now, this costs just over 100,000 pounds lift. but there is one advantage to the dound grade before brit yap. >> a downgrade indirectly helps us because of the pound being weaker. but essentially, how we will achieve greater growth is by increasing the volume of products that we make. so an extent, we should be much prouder of what we make here and

the fact that we have some of the best companies in the world. you know, rolls-royce and ricardo designing all the engineering for the cars of the future. of course, that's what we need to do is concentrate on the things that we're really good at. morgan, along with thousands of other brands will be hoping the 61 days of expo in june next year will push the starter button on britain's much needed new growth trajectory. >> no camera lenses were hurt in the filming of that piece. now, with spiraling debt, sluggish growth and repentance finance minister is the new challenge for italy see what experts are saying at cnbc.com. dennis lockhart says the central bank will continue its bond buying program into the second half of this year at least. and the benefits of qe outwait

the cost and policy questions. tomorrow, back in the hot seat talking to the house financial services committee. on the one hand, we've got italian election results. on the other, we've got ee quester at the beginning of the week and mumblings about fed policy. >> we did, yes. but i think that's the lesser of the two evils, the reassertion of the crisis in italy and the likelihood of running without a government for several weeks. i think we'll see the safe haven of the dollar, regardless of what bernanke says. that will be a continuation of the economy. >> is that because quite simply we always here focus on the ner

term issue? if your day-to-day trade, priced action is determined by the issue with the nearest term. >> well, the key to managing money is to lose as little as possible in those sharp sell-offes and reversion periods, finding somewhere to hide. >> where do you hide at the moment? >> well, i mean, the dollar is a haven, so you have to look for dollar earners. one sector that isn't usually considered to be safe, but i think will be in vogue for a few weeks is the mining sector because people are underweight in that sector. it hasn't performed particularly well. and i think you generally look around and say that's about as far away as i could get. >> production down and it will push the iron or orr prices up. >> i think the net of those, unless that storm turned out to be particularly damaging, we

won't know that for a while. i think net-net people will say, where am i going to hide? what's the dollar? put some money along. but it will do for four weeks while the italian situation blows over. >> lose as little money as possible in the sell-off. >> the vix is really cheap before the italian election. is it still cheap? is it worth looking at some, buying insurance, option insurance? >> it's the precursors. so if it goes back to being choppy, that will underpin the equities, but for the most, it's still intact. >> the bull story is still intact, but how choppy is it going to be for the next two months or so? >> that depends how quickly the

ecb responds, not with actions, but with words. >> if they're prepared to watch and see what unfolds, you could see yields up another -- >> what is after it? and what can he add to at the moment unless he changes the terms of the omt, having not yet launched it? >> will will be more on the lines of i repeat what i said. if that doesn't work, it will be now i'm going to show you. there will be lots and lots of articles written about we b oh, my goodness, he can't possibly do that, it's not under the rules. then we'll start to hear about the rules changing. >> thanks so much for joining us. it's always good to see you pup if you have any thoughts or comments, e-mail us or tweet us. still to come on the program, can italy tread the rocky road to the coalition government inspect we'll have the latest from milan. plenty more to come in the

second hour of today's "worldwide exchange." we'll be right back in just a few moments.

this is "worldwide exchange" and i'm ross westgate. european stocks plunge as political gridlock in italy sends jitters through the markets. bersani secured the lower house but no one secured a majority in the senate. they're heading to hold crisis talks in one hour. and ben bernanke heads to capitol hill to try and provide some soothing words about fed policy and try and calm investor fears about growth. >> announcer: you're watching "worldwide exchange," bringing you business news from around the globe. >> all right. if you just joined us, very good morning to you. welcome to the start of your global trading day. now, it's all about the results of the italian elections from european trade. as far as u.s. futures are concerned, we're currently

called a little bit higher at the moment on the u.s., which is interesting. bear in mind european stocks are firmly in the red. we'll check the futures in the moment. the dow is currently called up 25 points. the nasdaq and the s&p is currently called up nearly 7 points. as far as european markets, you can trust that with what we have on the screen. if xetra dax down 1.7%. the ftse down 1.2%. the biggest falls have been italian banks. a number of these banks opened limit down. unicredit down 7%. bmps down 4.95%, as well. the italian ten-year, 44.74%. we did rise to around 4.8%. so we have come down from the

biggest point of the selloff. italian five-year is currently at 3.482%. it's pushed spanish yields higher, as well. in fact, we hit the highest since december last year on a spanish yield of around 5.5. currently at 5.82%. treasury yields, a little bit higher. 1.88%. what's interesting here is gilt yields right now 2.015 is where we stand. so they're continuing to fall, even after those yields getting lower after the moody's downgrade. much of it, of course, is on safe haven flows. the pound itself, just holding above 1.5185 against the dollar. remember, 1.5073 was that three-month low. euro/dollar, 1.3109. dollar/yen in the middle of the range we hit yesterday, we had volatility between 94.77 and 94.8 a 5. currently at 92.25.

so as we look at political gridlock in italy, the european parliament president martin short is giving a statement about those elections. we'll keep you up to date with what he's saying, as well. there he is speaking at the moment. but as we monitor those comments, let's bring you up to speed with what's happened in asia today, as well. li sixuan joins us from singapore. sixuan. >> thank you, ross. asian markets felt jitters today on fears that italy's hung parliament could revise the crisis in the eurozone. the nikkei was the hardest is i hit, down more than 2% today. exporters took a beating from the election dead lock in italy. sony, nikkei and automakers saw their shares dropped. in china, the shanghai composite gave back early gains, ending lower by 1.4%. morning outperformers such as banks and brokerages turned into

negative territories. developers were sold off heavily on worries of more tightening curves. railway stocks lost ground after banking is likely to merge china's ministry of railways into the ministry of transport. shares in hong kong were at 2013 lows, ending down by 1.3%. financials took the brunt of the selling as the situation in italy really hurt investor sentiment here in asia. elsewhere, weakness in financials dragged the south korea kospi lower by 0.5%. the shift builders tumbled, as well. down under, it's a brd based sell-off in australia. the asx 200 lost by poor domestic earnings. india's sensex closed for today's trading session, down 1.6%. back to you. >> marine while, italians woke

up this morning to a state of paralys paralysis. apparently bersani won the lower house. beppe grillo won a quarter of the seat. that makes the five star the single biggest part. the former silvio berlusconi dismissed talks of a second poll and suggest he may reflect to an alliance with the center left and we've just had a t-bill auction and as you might expect, the average yield sharply higher. 1.237%. it was 0.73% on january the 29th. bid to cover 1.44 from 1.65. and so they raised 8.75 billion. that yield jumping nearly 50 basis points effectively. well, it has jumped 50 basis points. there you go. so that is setting us up for tomorrow. we have a key test tomorrow with a new ten-year being issued.

steve likes debt auctions. he's in milan, as well. a 50-point basis point pick up on the t-bill, steve. >> yeah, look. don't worry about the italian debt. they've only got 2 trillion euros. it only cost them 5% of gdp every year to finance. at this rate, it could cost them a little bit more this year. i want to make the point you raised about martin short. i found it fascinating he was going to make a speech. i'd love to know what they're going to say bearing in mind that they're not exactly pro eu parliament. so that will be fascinating, won't it? let's face it, anti-austerity was the theme of this. bearing in mind, we've got 50% of voters coming around to say grillo or berlusconi, we don't want aus tearpy. anyway, the bill fall guy in this election was the prime minister, the technocrat who ran, marto monte.

let's hear what he's been saying in the aftermath of these electoral disaster. >> translator: it's still too early to consider any solution, nor does it rest upon me to find one. but right now, i consider it is essential that there's maximum transparency between the political forces because we're all faced with a very serious responsibility. the government must ensure responsibility for the entire country. >> okay. so more analysis. alana fred reeko joins us now. you've had a big meeting today already, loradonna. you shook my hand. lovely. thank you. no one else did today. what did you guys decide is the way forward? >> following the outcome of the italian election, the situation looks complex. the center left coalition, that won the absolute majority in the lower house, but it was mainly due to a big surprise of the

five-star movement for 25 percentage of shares and the better than expected performance of the center right coalition. >> that will give us paralysis. but you said there was a possibility that doesn't include berlusconi. >> no. we retain the president of the republic nepolitano and give the -- the leader of the center left coalition which gets the absolute majority in the lower house to form the party's in coalition in order to try to form a government with a short time in order to get some clear goal. the first one being the change in the electorate. >> let's talk about that. if people get a change in electoral law, that doesn't mean to say we're going to have a

split government and it doesn't mean to say we're going to have cohesive government going forward, does it? >> yes. the idea is to try to uniform the morality to set the majority premium in the vote in order to avoid the one coalition could get the absolute majority in, for example, the lower house and get -- in the upper house. >> let me just paint another areao. now, i can it's interesting for all those people that are selling assets today, selling italian bonds, what have you. you actually say the stalemate we've got now isn't necessarily a negative thing if indeed it means there is no reversal in the short to medium term of policies enacted by monti. >> absolutely.

this is supposed to imply the -- >> okay. right. we ran out of time on that. anyway, let's hear a little bit more with tina ford, who is senior political analyst at citi. it's a shame we couldn't get the full information in. we've now got with the gridlock here, what is -- i know there are many options. what do you think is the most likely? is a fresh election more likely than us coupling together some kind of coalition? >> i don't think so. at least not yet. to address your question, the next government probably won't last its full five-year term. however, fresh -- >> what is the next government? >> well, we'll get to that. there's no mon date here for austerity. you have a fragmentation amongst political parties, cobbling together a coalition is going to be difficult.

historically, a coalition takes three to four weeks and it's not likely to be any quicker with this result. we are looking in the short term in weeks and probably months of political uncertainty. we have presidential elections coming, too. but in terms of fresh elections, they can't happen as quickly as they did in greece where they happened a month later. >> bettrsani will be first up trying to form a government. berlusconi said today he's considering whether they should try -- it was chance of them forming a grand on coalition? >> well, technically and structurally a grand coalition is possible in italy, just like happens in germany quite often. a lot of italians would tell you that's not likely because the political system is so rancored and there's so much acid between

the parties. however, politicians like berlusconi and the other party leaders are going to spend the next several weeks horse trading, hammering out their positions, trying to stress to their constituents that they aren't going to led the side down while trying to maximize their leverage. >> grillo is now the single big -- normally a party movement, single biggest party movement, whatever you call it now in italy with 25%, how much of a wild card is he? he always said i'm not going to get into coalition politics. there's certain issues i would vote for. if you take away 25% and say we're not going to be part of the government, that's a major -- do you think he might move on those previous statements? it's hard for him, isn't it? >> as an upstart opposition

party, grillo finds himself winning handsomely. the question is, how does he convert this into power? >> he's always said he never wanted power. >> he's excluded himself from actually being in government. he said they wouldn't join a messy coalition. take all this with a grain of salt. when opposition parties move into government, they have to moderate their positions. so one scenario, which i am coming around to thinking might be quite likely is the formation of a minority government where berlusconi's party and some with grillo would vote. so they can lay out that platform and how that would work because everybody knows the political establishment and the people know that six months of political uncertainty would be very bad. >> where does this leave -- and this is the key thing for european elite and the key thing for investors. where does this leave monti's

reform agenda? has that just died or -- >> monti came in & in fourth place. he was tied for third spop italians, while they respect pasore, they haven't really come out for austerity. >> the reforms for the europeans politically are deemed necessary for financial support to italy? >> well, let's look at what happened in france last year, right? in france, austerity support for austerity is the rapport there, as well. most european leaders, whether on the left or the right have to stay with this agenda from europe. but they're going to try to do it speaking out of both sides of their mouth. in france they want to base taxes on the wealthy, for example, as a populist measure. better san knivny will try to do the same thing. the roof is very limited.

>> okay. stick around. can they form a coalition before it's too late? see what experts are saying on our headlines, cnbc.com. "worldwide exchange" will continue. [ male announcer ] i've seen incredible things. otherworldly things. but there are some things i've never seen before. this ge jet engine can understand 5,000 data samples per second. which is good for business. because planes use less fuel, spend less time on the ground and more time in the air. suddenly, faraway places don't seem so...far away. ♪

and a recap of the headlines

for you. stocks fall, bond yields up in early european trade. this after political gridlock in from italy looms as no party has won an out with post election in italy. plus, ben bernanke could shed some light on the qe program in advertise testimony on the little today. besides mr. bernanke, which is what else is on the u.s. agenda today. the case-shiller price home index is out at 9:00 a.m. eastern. prices call for forecast to rise more than 10%. january new home sales are expected to rise 10%. analysts expect a meeting of 62.4, that will be up nearly four points from january. home depot, auto zone, macy's, senate health care, metro cps all report results before the open. after the close, we'll hear from priceline and tivo. and the fdic releases its quarterly report from bank

earnings and the u.s. comptroller puts out his estimates on wall street bonuses again at 10:00. >> as i said, fed chairman ben bernanke will take a lot of the attention. he's on capitol hill today. give part in one of the semi policy on economic policy. there's a lot going on at 10:00 eastern. bernanke is expected to address qe3. some members would like to end the program early. he'll likely say the policy will stay as long as needed but, but he may fuel questions about how the fed would unwind i said easying program. the sequester takes effect on friday. talking of which, president obama goes to virginia today to press his case for congress and republicans in particular to avoid the automatic back budget cuts that will take effect this week. he's going to be in newport news where the u.s. navy builds aircraft carriers and is submarines. house speaker john boehner says the president is using the

military as a campaign prop when he should be working with senate democrats to avoid the across the board spending cuts. >> if we don't solve the spending problem here in washington, there will be tens of millions of jobs in the future that won't happen because of the debt load that's being laid on the backs of our kids and our grandkids. >> and the snooed senate is expected to vote this week on competing plans from democrats and republican toes replace the looming 8el $5 billion in budget cuts with either alternative spending cuts or a mix of cuts and new revenues. tina is still with us. tina, we got -- with italy, we ended up getting the worst case scenario. in terms of what investors were looking for, i.e., scheduled political grid. what's the chance of getting the worst case scenario here out of u.s. congress? i know if there's a sequester and also the continuing resolution that would shut the government down?

>> sticking with this theme of political risk and fragmentation, for the u.s., we've talked about this fiscal bermuda triangle, right? but it's important to note that the worst things haven't happened. we went over the cliff for a few minutes in december and the debt ceiling was raised temporarily until may. so those were the worst outcomes for markets. and that is what sees into our scenario for what happens next because it seems quite clear that both parties have made the political calculation that allowing the sequester to take effect may be a way of putting pressure on one another. the president clearly trying to blame republicans for being intransgent and republicans wanting to keep the heat up on the white house to avoid -- to enforce those cuts. so it's the way to extract some paint from one another, but not too damage to markets.

>> discretionary spending and 850 government agencies, we think it stays on until the summertime because summer is when the u.s. congress tends to focus on these big issues. you have also, you know, 201 budget issues. and then 2014 fiscal year and that makes it harder to resolve. >> are we in the game here? >> absolutely. and the president is looking at the opinion data that says the majority of americans blame republicans for this impasse. republicans, on the other hand, are looking ahead to midterm electiones and looking to position themselves on this fiscal conservative front. >> i can't imagine anybody is going to allow the government to

shut down, though. >> well, it's a risk that we flagged and there have been, you know, more than a dozen government shutdowns, in fact, over the last couple of decades. most of them are pretty market neutral. the gingrich/clinton shutdown really hurt republicans. the mood of brinksmanship in washington does appear to have receded somewhat. >> all right. stay right there. still to come, will it all be changing as iran holds elections, as well, this summer? will it bring diplomacy or conflict? more on that in just a moment. ♪

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and kept turning the page, writing the next chapter for the rx and lexus. this is the pursuit of perfection. the xetra dax down 1.8%, the ftse 100 down 1.25%. the cac 40 down 2% and the ftse mib down 4.57%. have we got the u.s. futures board? there we go. we are called higher. the dow up 55, nasdaq up 75.points and the s&p up 5 points. the country will put forward a new packet of proposals for iran. they gave no details, loit suggested they may be open to

change. what is the likely outcome of the political machinations in iran and what does it mean for the rest of the world? >> i don't think we should expect any breakthroughs. the simple fact that they're taking place is what's important. >> and then as you were. >> with other things happening in the background, elections in january, yahoo!'s roan for maneuver. obama is not keen to see another military invention. that's an opportunity to change the hymn sheet, if you will, for the government to anoind noint another successor. the fact that the talks are happening over engagement, i don't see iran giving up its nuclear program. >> it's good to see you. tina ford, political analyst at italy. still to come, we'll look at

consumers being a bit more cautious on spending. what are the high-end stores doing to keep and grow their customer base? we'll be joined by the head of the luxury marketing counsel.

you're watching "worldwide exchange." european stocks plunged on the

prospects of political gridlock in italy. italian bank stocks lead the way lower. that's after the center left coalition wins the lower house, but no one has secured an obvious majority in the senate. the current government central bank are holding crisis talks. and ben bernanke is heading to capitol hill today to try to provide some soothing words about fed policy and calm the market concerns about weak global growth. >> very good morning to you. italian elections hasn't impacted, yet, the u.s. futures. the dow has called up just over 50 points. the nasdaq has called up at the moment around six points. the s&p 500 at the moment is called up around about 5 points. they have come down slightly in the last half hour.

but contrast those opening calls with this. european equity markets, quite a divergence. the ftse 100 is the best performer. it's italian banks, as well, that have had the hardest hit this morning. people are wondering what that would do for the complex and the agenda in italy. so that is where we stand right now ahead of the open. let's remind you about what some have said about what it ae all means for sin investve investor.

>> we're going to see mormon tear stimulus from japan. but, again, it's the tensions from the eurozone, i think the yen can strengthen a little further. holdings have to remain fairly large. they're still around 700 billion euros, then we could see the crisis deepening. but at the moment, it can produce a more significant move. >> when the currency goes down, the ftse goes up. there's currency, as well. we estimate roughly a one for

one correlation to appreciation. so, actually, owning the ftse is quite an attractive option. >> today, inest havers will hear from high chain stores, macy's and saks. the buying by customers has tied a great deal to how the stock market is doing. good to see you. how much does the wealth effect play into luxury goods purchases? >> thank you for having me. it's a short-term effect. in my days, we would see the fluctuation correlate directly with the fluctuations of the market. but those that are the most effluent and the most educated

tend to get over those fluctuations quickly and go back to their habits of buying. >> and yeah. obviously, retailers have greatly impacted by the weather. will we see a sandy impact, do you think, on the dock today? >> i don't think so. >> why? just because it was -- >> i think most of the retail stores were at least in the up town of manhattan and it didn't, i don't think, have a major impact. >> what is happening with margins? >> margins at the high end are healthy, very healthy. >> is that the key difference? >> yes. if you look at traditional mass retail, 5% to 7% gross revenue growth is something to celebrate. even know and well past the recession, we're seeing double digit growth for most luxury brands with almost impunity.

>> where is the demand coming from? who is driving that? >> the top buyer, the most effluent, the most sophisticated, the most educated. globally, 10.4 million people with investable assets of a million or more and within north america, 3 million. so the play from a marketing standpoint is for that top customer, a greater share of wallet, greater loyalty of and greater referral by similar customers to the brands. >> yeah. and is there a split in the luxury category? there seems to be -- and that will be amazing if it's the luxury brand that is everywhere. there's a split between sort of the he everywhere luxury and what i would call initianiche. >> there certainly is. i'm seeing a company called interbrand and they've written a point to your point kaut called metta luxury and then there's premium luxury. all of them share, however, that 1047 million and there's strategies in terms of winning greater share of wallet, best

customer are very different. >> yeah. and is this a brand as opposed to -- as much a brand battle as anything else? >> i have never, in the 20 years of the luxury marketing counsel seen it so much as a brand battle as a marketing battle. i think brands -- the best customer can afford that constant, the $1,000 a noois night -- >> but my point is, what makes you decide between spending your money in one shot shop or one brand as opposed to the other? >> it's the quality of the marketing. the ability of the brands from a marketing standpoint to touch and better understand and segment their most important investors. >> so the most important person is the marketing firm? well, the most important person in the luxury goods is the customer. but the marketing department, i think, has moved from we tell them what to wear point of view to a -- more of a classic packaged goods approach to fully integrated brand marketing. >> great to see you.

>> i love london and it's great to be with you. >> thanks. we could be a luxury business. greg furman, are we a luxury business? >> i think you are. information is critical. >> okay. great. i like that. thank you. greg furman. now, roaming charges may be a scary phrase to frequent travelers, but it's the key revenue stream that's in danger of going way for mobile providers. kelly will be speaking from the mobile world congress. she's still in barcelona. day two of that. more to come on "worldwide exchange." [ kitt ] you know what's impressive? a talking car. but i'll tell you what impresses me. a talking train. this ge locomotive can tell you exactly where it is, what it's carrying, while using less fuel. delivering whatever the world needs, when it needs it. ♪ after all, what's the point of talking

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beat their 10-year lipper average. t. rowe price. invest with confidence. request a prospectus or summary prospectus with investment information, risks, fees and expenses to read and consider carefully before investing. travelers spent $17 billion a year trying to avoid roaming charges, according to our next guest. and he says roaming charges are a critical revenue generator for mobile services, but they're becoming highly po lit sized in the eu. if you're wondering where kelly is today, it's because she's still in barcelona. you can't get enough of it. >> ross, that's right. i'm still practicing that spanish dusting it off. fascinating company with me here now.

cinaburst. it's not a name many know, but everyone is using it. if you think the roaming charges are just something in the mobile universe, think again. they're actually a major revenue stream. jeff, ceo of syniversee, joins me now. you're a tampa based company that has somehow become im broiled in politics. tell us how. >> subscribers, we can pick up our mobile phone and we can call or text or send a video to any other mobile subscriber in the world and it all just works. >> what's interesting, though, is that people still have to pay big money for roming charges for when they're on someone else's network. $17 billion. who is capturing that revenue now? >> the $7 been refers to what we call transient roaming. so instead, they're connecting to wi-fi in hotels, which is

accounting for nearly half of that amount. they're connect to go wi-fi in other locations and then they're also taking sm cards and buying them locally at the airport and sticking them in their phones. when you think about it, that's a shame because it degrades the whole mobile experience. >> and it's up to the operators now to win that back. but it comes at a time when, in fact, next july i understand there's going to be this decoupling in the european union. suddenly they can pick from any roaming operator, right? >> that is correct. that is somebody who basically has the choice as to who they want to connect their mobile device to. that's going to become a norm here in europe and i think in many parts of the world. so in order to keep up with those folks, i think it's essential for mobile operators to do a couple of things. one is they have to use their intelligence. they have to know their customer, they have to be proactive and they have to take advantage of that knowledge to present to their customers value propositions which meet their needs. for example, when you landed here in barcelona, if the

operator knows that this is the time you come to barcelona, you do it once a year for two days, to offer a two day only barcelona roaming charge reduces your costs and allows you to still enjoy the promise of mobility, simply pulling out the device and using it the. >> quickly, you were public, you're now private, owned by carlyle group. when are you going public again? right now, we're focused on just delivering value and continue to go make sure that we expand our infrastructure and our presence around the world. so we serve today over 700 probably operators. today we also serve hundreds of major enterprises, banks, major internet players and so forth. so our goal is just to continue to deliver outstanding service, to have a broader portfolio of customers and products and keep delivering on the promise of mobility. >> well, syniverse is the name to watch here. thank you so much, president and ceo of syniverse. also a case of a tampa, florida, based company that's hiring.

800 employees and hiring. 2,000 worldwide. that's it for me here from mobile world today in barcelona, ross. there will still be plenty more to come. stay tuned especially for q-tell later in closing bell. >> and is we're all going to become transient roamers. are you going to do a bit of that while you're there? >> transient roam sg exactly what i'm doing here. in that case, i'm going to be transient roaming for some lunch in just a bit. >> kel, great. are you back with me tomorrow or is it thursday? friday. >> it might be thursday, but there might be a few other little morsels from mobile world that we speed out over air tomorrow. stay tuned. >> thanks, kelly. good stuff. thank you for that. we have a comment out from bank of england policymaker david miles who says risks of things going badly wrong in the eurozone are crystallizing. and with that, i'll remind you on of what's in the headlines today. stocks fall as italian banks plunge and peripherals surge in

trade the as political gridlock in italy looms. also today, ben bernanke might be shedding some light on the fed's qe program. he goes to the hill today to give day one of his latest testimony. >> of the other stories we're following, as well, atlanta fed president dennis lockhart says the fed should stick with qe3 at least into the second half of next year. he doesn't think monetary policy has crossed the line, whether benefits are outweighed by concerns over problems it may be creating. lockhart says if some potholes are avoided such as a financial crisis or fiscal cries, u.s. growth would pop his current range of 2%, 2.5% this year. at the same time, the senate finance committee is expected to vote today on jack lew's nomination for treasury secretary. if that goes without a hitch, the full senate would be likely to confirm lew on wednesday.

they have raised issues with bonuses he received at citigroup during the financial crisis and an investment in the fund in the cayman islands, but they're not threatening to derail his appointment. jpmorgan holds an investor day today, the first since the bank first revealed the london well last may. the meeting in new york started 8:30 eastern. ceo jamie dimon speaks this afternoon. he's expected to tell investors that jpmorgan is growing in business and taping market share. in an effort to convince critics, the bank is putting the lows mind it. jpmorgan stocking frankfurt currently down 1.2%. and european governments have joined the chorus of voices in the market telling italy that it must continue with reforms, but new election results suggest they're knocking on a closed door. more analysis when we come back. [ woman ] if you have the audacity to believe your financial advisor should focus on your long-term goals,

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i'll tannan prime minister mario monti is set to give a speech. this as the french and german government have begun their push to keep the country's reform agendas on the track. bearing in mind the huge anti-protest vote we have, beppo grillo was antiausterity and so was berlusconi. where does this leave the reform agenda that monti was trying to introduce? >> i think you're right. it's absolutely one of the key points, ross. speaking of the italy economist owes this show early on, he makes a very important point. stalemate not only means no new more laws, but it means they can't reverse the old laws. the laws that monti has put in.

well, they remain, don't they, if we have a stalemate because no one can get rid of them if no one is greeting politically. there is no more progress, but they can't be backtracked upon, as well. >> perhaps the only reform we look at now is the electoral reform. if we do eventually have to go to a new election, at least we don't find ourselves back in the same position again. >> but the 250i78ing towards this next election, i have had nothing coherent from all the local press, the economists and the international press. it's all about the reform agenda, the electoral process, the reform of that electoral process. let alone any form of coalition. and that is adding to uncertainty in the short-term in these markets, hence why we saw 8.75 billion euros of six-month t-bill auctions today. it was 1.274 interest rate rather than the previous 0.73. we saw only in late january. >> and, k, we have five and ten tomorrow.

>> which means that the 08 billion euros that was spent financing italian debt last year, which is a meager 2 trillion euros, that, again, will be perhaps elongated and more expensive this year. and that's a real cost for their country. >> absolutely. talking about the possibility of going back to a new election, i think perhaps all these parties, particularly berlusconi and perhaps for monti and bersanis, they won't want to go back to this too quickly because grillo, could we continue to garner support that we've seen growing? >> electoral reform, they want to grow it, they want to change it. does that mean that parties that get only 30% of the vote would become the majority policy? is that the policy we want? big question marks all of. >> i don't know. we can do it in this country. steve? >> we tend to get to 40%. >> you can have your share of the total vote to be a lot less than your former government. but you get a deposit and that's the point, right?

you can implement decisions. steve, julia, thanks very much for that. plenty more coverage coming from rome and milan, as well. european results on the back of elections in italy are much weaker. we started today around 2.24% when we closed towards tend of the session yesterday. right now, ten-year yields, 2.758 ers. don joins us from icap. we had priced in political stability. now we're pricing in political instability. where might that take that yields? >> well, i think in terms of the italian ten-year, which i think is a big focus for the market at the moment, 5% is obviously the big figure that we're heading towards. and we might well get there over the next week or two. depending on how things pan out with regard to the negotiations

post election. but there's huge uncertainty in the markets at the moment. >> julia mentioned, we have a new ten-year being auctioned tomorrow. what does it do to that? >> probably not a great deal of support. market nervousness. you can feel it in price actions and you can feel the investor nervousness across these markets at the moment. i think it's going to be tough. i think the yields will suffer. we may see some further give up in yield tomorrow. but we're around about 4.77% on the ten-year and we're pushing towards 5%. could easily see another 10, 15-point basis move in the yield tomorrow which makes issuing conditions extremely difficult. >> what is at the heart of the fear here? is it -- we've had such a good run since draghi launched the omc. is there any way here in the back of traders minds thinking

if we don't have a stable, strong government reform minded government, the omt might not stack up. >> yeah. i think -- and this is quite an important point, as well. remember, there's a short selling ban, as well. so the weakness that we're seeing at the moment in the italian government bond market is obviously being less driven by speculative aggressive short selling. and it's more fundamental in nature. now, this is something which is likely to be more sustained and ultimately more difficult for the omt strategy to deal with. so, you know, the omt program is a little bit of a double edged southward in this sense. if we do start to see further weakness in the italian government bond market, then there's a risk that negative expectations could really fill it quickly. >> add into that we've got bernanke going into the hill today, how is he going to play across this? >> probably a very straight bat, i would have thought. i don't think the markets are

expecting much from bernanke today. the focus is so much on the uncertainty that's been generated by these a italian elections in the eurozone. >> fair enough. john smith, government bond strategists at icap. despite the fall in european markets, u.s. futures for most of the session today, still a way to go, have been pinpointing to an upward start for u.s. equities. that is still the case. that's it for today's edition of "worldwide exchange." "squawk box" is coming up next. plenty more from italy on that. whatever happens, i hope you have a profitable day. bye for now. [ male announcer ] any technology not moving forward is moving backward. [ engine turns over, tires squeal ] and you'll find advanced safety technology like an available heads-up display on the 2013 lexus gs. there's no going back.